21 Jan 2014
Flash: RBNZ to hold rate hike cycle until March - RBS
FXstreet.com (Bali) - While New Zealand CPI increases odds of a Q1 hike, according to Greg Gibbs, FX Strategist at RBS, March is still the most likely date to raise rates against January or February.
Key Quotes
"NZ CPI rose 1.6%y/y in Q4, above 1.5% expected. The quarterly rise was 0.1%q/q, above -0.1% expected. This is still below the RBNZ target of 2%, but is the highest 9 quarters."
"This data suggests inflation is rising sooner than the RBNZ had predicted in its Dec MPS where it forecast headline inflation at 1.4%. As such it should increase their urgency to hike rates. The housing data yesterday was softer than expected, but this CPI probably outweighs that news and may be enough to trigger a first hike in Q1."
"2yr swap rates are up around 5bp since the data, reflecting the fact that significant tightening was already priced in over the next two years. The odds of a 30 Jan hike have lifted a bit to price in 8.5bp of tightening up from 6bp, with more than one hike priced in by 13 March (31bp), but up only 0.5bp since this data."
"We think a first hike s more likely in March with the RBNZ likely to reluctant to hike when many of its peers are still cutting or unlikely to hike for the foreseeable future. While inflation is rising they will take heart that at least the housing sector price inflation has not accelerated and recent housing data has cooled since it introduced macroprudential controls. The strong NZD, especially against the AUD will also discourage a hike."
Key Quotes
"NZ CPI rose 1.6%y/y in Q4, above 1.5% expected. The quarterly rise was 0.1%q/q, above -0.1% expected. This is still below the RBNZ target of 2%, but is the highest 9 quarters."
"This data suggests inflation is rising sooner than the RBNZ had predicted in its Dec MPS where it forecast headline inflation at 1.4%. As such it should increase their urgency to hike rates. The housing data yesterday was softer than expected, but this CPI probably outweighs that news and may be enough to trigger a first hike in Q1."
"2yr swap rates are up around 5bp since the data, reflecting the fact that significant tightening was already priced in over the next two years. The odds of a 30 Jan hike have lifted a bit to price in 8.5bp of tightening up from 6bp, with more than one hike priced in by 13 March (31bp), but up only 0.5bp since this data."
"We think a first hike s more likely in March with the RBNZ likely to reluctant to hike when many of its peers are still cutting or unlikely to hike for the foreseeable future. While inflation is rising they will take heart that at least the housing sector price inflation has not accelerated and recent housing data has cooled since it introduced macroprudential controls. The strong NZD, especially against the AUD will also discourage a hike."